Net operating loss tax relief;

Page 1

Losses of one year may be tax deductible
for another. Here is an article explaining
the problems in obtaining—
THE PRACTICE OF USING ANNUAL PERIODS TO DETERMINE TAXABLE
INCOME and graduated income tax rates to compute the tax liability
creates a hardship for taxpayers whose income is subject to wide fluc­tuation.
The problem is intensified for the taxpayer who has the mis­fortune
to incur a business loss in a year in which the loss will be of
no tax benefit because of lack of other income to offset the loss. Con­gress
has recognized this inequity and has provided partial relief by
providing for the offset of losses against profits of other years. The
relief is not, however, a direct offset. Congress has limited the offset
of loss against profit by requiring certain adjustments in determining
the amount Of loss of one year available to offset profit of another year.
Rules, adjustments, and modifications described in this article are
applicable to the current law. The only significant changes in the law
since 1954 were enacted in 1958 and 1960. The changes in 1958 per­tain
to the increase in the number of years subject to carryback, alloca­tion
of losses arising in fiscal years ending in 1958 and 1954, disallow­ance
of net operating loss deductions to corporations electing to be
8 THE QUARTERLY
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